Contractors, NGOs, CBOs, or governments: What’s the best channel for bilateral aid?

That’s a trick question. The answer is: It depends. What does it depend on? That one’s harder to answer.

Last week, John Norris wrote in Foreign Policy under the provocative title: “Hired Gun Fight: Obama’s aid chief takes on the development-industrial complex.” Rajiv Shah has made moves to reduce the amount of USAID funding that goes through government contractors (a.k.a. the “Beltway bandits”) who conduct significant aid and development activities on behalf of the United States government. Shah is a proponent of more direct funding to NGOs, CBOs, governments and other institutions in developing countries.

Not surprisingly, the contractors are not happy about this turn of events. It would mean a huge drop in their revenues and influence in DC. They have mobilized their political allies and even created a new Coalition of International Development Companies as a lobby group.

I blogged on this issue exactly a year ago today (and since blogging is basically a race, that means I win, right?). I tried not to use the “fight” framing that Norris puts in his title, though it’s hard to avoid the problems of partisan bickering when discussing anything in DC. Something in the water (maybe the lead?) makes everyone line up on sides and duke it out, regardless of the issue.

Ultimately, we need a more considered approach to this discussion on contracting versus grants, international versus local, government versus nongovernmental, and so on. We (and I am as guilty as any) tend to make broad statements about the need for increased accountability in aid, more local support, better engagement with existing institutions, or greater efficiency. All of these priorities suggest general responses that don’t always align with one another — e.g. “more accountability” and “lower overheads” often work at cross-purposes. That’s actually okay, because we don’t need general responses anyway. What we need are specific ways to decide what makes the most sense in different situations.

That is, we need to answer the “what does it depend on” question. Shah’s USAID FORWARD strategy, for all its merits, does not seem to address that issue. The contractors’ advocacy certainly doesn’t offer an answer. Advocacy is not a good vehicle for nuance in any case.

We need a conceptual framework for when it should use contracts and when it should use grants. USAID FORWARD promises new policies and guidelines, but it seems that nothing’s been decided yet. Here are a few thoughts:

The specificity of a contract makes sense when the program can be clearly defined in advance. This requires a detailed level of knowledge before the contract is signed, a context that’s relatively unchanging, and easily measured results. If you want a road or a building, contracts will provide more accountability.

Grants provide more flexibility for implementers. For nuanced programs in uncertain contexts, where there’s no way to collect sufficient advance knowledge for detailed planning, and the outcome metrics require a certain amount of interpretation, a grant can describe the broad outlines while allowing the program managers the autonomy to chart the right course. If you want human rights organizing or participatory community development, grants make more sense.

However, between road construction and human rights, there’s a gray area. This is where the policymakers really have their work cut out for them – and why I’m so heartened to see “Rebuilding Policy Capacity” as the third key area in USAID FORWARD.

A few people chimed in with comments on this issue, but I’ve yet to see a clear policy document that really lays out a framework for thinking through these choices. Academics are focused heavily on the public policy and intervention choices, and they pay less attention to the implementation and management issues like procurement or grant mechanisms. It’s the kind of thing that I would love to sit in a think tank and work on, if I didn’t love my actual job more.

Anyone know if someone has really taken this issue on in a thoughtful way?

One thought on “Contractors, NGOs, CBOs, or governments: What’s the best channel for bilateral aid?”

There was a report written for USAID along similar lines. “Choosing the best way to provide assistance: The implications of project and non-project assistance modalities for aid effectiveness.” http://www.equip123.net/docs/E2-NPA_Paper.pdf